Maputo — Note to subscribers: this replaces an earlier story on the interest cut, which contained errors
The Monetary Policy Committee of the Bank of Mozambique (CPMO), meeting in Maputo on Wednesday, decided to cut its benchmark interest rate, known as the MIMO rate, from 9.5 per cent to 9.25 per cent.
A statement from the CPMO said the decision for only a small cut in interest rates was the result of "persistent inflationary risks, a slowdown in economic activity, and the severe impacts of climate shocks on the national economy.'
Follow us on WhatsApp | LinkedIn for the latest headlines
According to the governor of the Bank of Mozambique, Rogério Zandamela, who was speaking to reporters on Wednesday, the decision results from the current prospects of maintaining inflation at controlled levels, still surrounded by risks and uncertainties, particularly associated with the current floods affecting logistics chains, the supply of essential goods, and the pace of productive capacity management.
The reduction in the MIMO rate, he said, "is supported by the inflation outlook, notwithstanding the materialization of certain risks and uncertainties associated with the inflation projections.
The CPMO warned that there are unlikely to be any further significant interest cuts in the near future. "We are nearing the end of the monetary policy easing cycle', said Zandamela.
According to the governor, medium term prospects are for continued single digit inflation (i.e. an annual inflation rate of less than ten per cent).
In December 2025, annual inflation was 3.2 per cent, a decline from the 4.4 per cent registered in November. Underlying inflation, which excludes fruit and vegetables and goods with administered prices, also slowed down.
According to the CPMO, the prospects for continued single digit inflation "essentially reflect the stability of the metical and of international commodity prices, as well as contained domestic demand'.
For the medium term, the prospects are for only modest economic growth, with the exception of liquefied natural gas (LNG). In the third quarter of 2025, again excluding LNG, Mozambique's Gross Domestic Product contracted by 1.3 per cent year-on-year, after a fall of 1.7 per cent in the previous quarter.
When LNG is included, GDP fell by 0.9 per cent, after a similar contraction in the previous quarter. In the medium term, says the CPMO, a gradual recovery is forecast, but at a slower pace due to the effects of climate change.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
The central bank says that the main risks and uncertainties associated with the inflation projections include the impact of the floods on the supply of goods, and the logistics chain, the pace of the restoration of productive capacity, and the effects of the delays in the Mozambican state paying off its own debts.
The external constraints that could affect Mozambican inflation include the worsening of commercial and geopolitical tensions, which can affect the behaviour of food and merchandise prices.
